SkyWest reports net income of $41 million in the third quarter, outlines its fleet plans

United Express-SkyWest Airlines Embraer ERJ 170-200LR (ERJ 175) N108SY (msn 17000401) LAX (Michael B. Ing). Image: 930967.

SkyWest, Inc. (St. George, Utah) reported its financial and operating results for the third quarter of 2016, including net income of $41 million or $0.79 per diluted share, up from net income of $36 million or $0.71 per diluted share in Q3 2015. Excluding the $9 million non-cash impact of early lease return charges on six CRJ700s, adjusted diluted earnings per share was $0.90 in Q3 2016. Pre-tax income for the third quarter of 2016 was $67 million compared to $60 million in Q3 2015.

Commenting on the results, Chip Childs, SkyWest, Inc. Chief Executive Officer, said “Since early 2014, we have grown earnings by executing a complex fleet transition that added 67 new E175s and reduced our 50-seat fleet by over 120 aircraft. Our focus through 2017 will be on reducing the overall risk profile of the company, integrating the remaining deliveries of 37 E175s, optimizing how our assets and capital are deployed and positioning for future growth. Our employees have delivered amazingly well against challenging goals and have again provided our customers with solid operating performance, despite the significant changes to our fleet during the quarter.”

SkyWest’s total fleet in service decreased by 13 aircraft during the third quarter of 2016 as follows:

skywest-fleet-graph-1

Alaska SkyWest (SkyWest Airlines) Bombardier CRJ700 (CL-600-2C10) N223AG (msn 10010) LGB (Michael B. Ing). Image: 924092.

Above Copyright Photo: Alaska SkyWest (SkyWest Airlines) Bombardier CRJ700 (CL-600-2C10) N223AG (msn 10010) LGB (Michael B. Ing). Image: 924092.

SkyWest’s total fleet in service decreased by 14 aircraft from September 30, 2015 to September 30, 2016 as follows:

skywest-fleet-graph-2

During Q3 2016, SkyWest redeployed six CRJ700 aircraft into service under a multi-year agreement with American and redeployed four CRJ700 aircraft into service under a multi-year agreement with Delta.

SkyWest previously operated the combined 10 CRJ700s under an agreement that expired with United. A total of 37 CRJ700 aircraft with scheduled contract expirations with United are scheduled to be redeployed with American by mid-2017, eliminating the related financing tail risk on these aircraft through 2019.

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Copyright Photo: American Eagle Airlines (2nd)-SkyWest Airlines Bombardier CRJ200 (CL-600-2B19) N492SW (msn 7168) LAX (Michael B. Ing). Image: 927579.

SkyWest anticipates its CRJ200 fleet and its ERJ145 fleet (“50-Seat Aircraft”) will be reduced by approximately 16 aircraft by the end of 2016 as a result of flying agreement expirations with multiple major partners. During Q3 2016, SkyWest extended the contract term on nine CRJ200s with American from the end of 2016 to the end of Q3 2017.

Under a previously announced lease return arrangement, SkyWest is currently scheduled to return 11 additional CRJ700s over the next six months. If the aircraft are returned as scheduled, SkyWest anticipates largely non-cash termination costs of approximately $15-17 million (pre-tax), which will be recognized as the aircraft are removed from service and processed.

The following table outlines SkyWest’s anticipated delivery schedule for new E175 aircraft through the end of 2017:

skywest-fleet-graph-3

Top Copyright Photo: United Express-SkyWest Airlines Embraer ERJ 170-200LR (ERJ 175) N108SY (msn 17000401) LAX (Michael B. Ing). Image: 930967.

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